The Employee Free Choice Act

By on April 27, 2009

Two experts debate the Employee Free Choice Act.

Richard A. Epstein
University of Chicago

Richard A. Epstein is the James Parker Hall Distinguished Service Professor of Law at the University of Chicago, Peter and Kirsten Bedford Senior Fellow at the Hoover Institution, and a visiting professor of law at New York University Law School.

Ron Moore
Examiner.com

Ron Moore is a writer for Examiner.com living in Silver Spring, Maryland. He is a former local union president, union organizer, national AFL-CIO staff, and writer for the A. Philip Randolph Institute. He was an organizer for the Service Employees International Union and president of the American Federation of Government Employees Local 1 (a national Local), Department of Homeland Security/TSA.

Part 1: Richard A. Epstein: The Case against EFCA

The Employee Free Choice Act’s (EFCA) liberal defenders have attacked the current structure under the National Labor Relations Act (NLRA) as inhospitable to unions.[1] Thus EFCA contains three provisions, which, if enacted into law, would transform the institution of collective bargaining.

The first proposal would allow either party the option to substitute a card check system for the current electoral system. To be sure, EFCA leaves in place the present NLRA provisions that allow unions to proceed by filing a representation petition supported by 30 percent or more of employees in an appropriate bargaining unit and then holding elections.[2] Nonetheless, it seems clear that in virtually all cases the card check will displace the secret ballot. As a matter of current practice, virtually all major unions choose to file representation petitions only after they have accumulated signed authorization cards from well over 50 percent of unit members. They need that cushion because they know from experience that worker defections will take place during the course of any election campaign in which management can present its own case of the tradeoffs, costs and disadvantages of representation. It follows therefore that no rational union would risk the election if they have in their possession authorization cards from just over 50 percent of the members of the unit they seek to represent. As a practical matter however, EFCA would wholly displace union elections with the new “card check” procedure. No union is likely to file for an election with over 30 but under 50 percent of signed authorization cards in the hopes of improving its position during a campaign. The conversion to the card check system is likely to prove well-nigh complete.

Compulsory Interest Arbitration

EFCA’s second major provision would introduce a system of compulsory interest arbitration that leads to a first “contract” of two years duration. The term contract is put in quotation marks because an actual agreement that obtains the assent of both parties is not required during the initial period in question. This mandatory first contract, moreover, is not limited to wage matters but must cover all the issues that are typically hammered out by agreement under the current system.

Increased Penalties for Employer Unfair Labor Practices

The third major change of EFCA, which ties in closely with the adoption of the card check system, substantially increases the penalties imposed on employers with respect to violations of section 8(a)(3) of the NLRA, which prohibits discrimination against employees for their union activities.[3] This section also requires the NLRB to give priority to charges of unfair labor practices that arise in the course of an organizing campaign, in order to backstop the advantage that unions expect to receive from the addition of the card check alternative.

EFCA’s Economic Consequences

The legislative adoption of these provisions, taken together, would radically alter the balance of power between management and labor. Its impact would extend to virtually all businesses, except from some small business that fall below the “interstate commerce” thresholds that the NLRB applies in exercise of its own jurisdiction.[4] But even those exemptions have little relevance to any new firm that hopes to grow over time. The bottom line, therefore, is that the passage of EFCA will create huge dislocations in established ways of doing business that will in turn lead to large losses in productivity. Small businesses, which as a group are the largest source of new jobs in the country, will find themselves besieged with insistent demands for unionization, for which they are ill-equipped to cope. These businesses often operate on small budgets, without the assistance of full-time lawyers. Under EFCA, their first exposure to unions could come at the conclusion of a secret campaign, which requires them to both hire and acquire expertise on contentious matters for which they are ill-equipped to deal, at a cost which they can ill-afford to bear. These calls for unionization will divert management from the essential tasks of product development, marketing and sales, on which their business models necessarily depend. The likely consequence of EFCA will be to retard the formation of small businesses, as fledgling entrepreneurs will reassess their prospects of success to take into account the danger of derailment at an early stage in the process. In the long term EFCA will reduce the rate of firm formation, and thus deprive the economy of a central driver of new job creation and technology growth.

Large firms face a different set of difficulties. Like their smaller compatriots, they will face the heavy costs of meeting simultaneous multiple threats of unionization. Since they operate through far-flung, geographically dispersed divisions, they face the risk of inconsistent arbitral decrees that will impede the development of firm wide practices. Given the uncertain scope of these decrees, it is quite possible that restrictions designed to preserve job security within a unit will limit the ability of the firm to reorganize non-unit employees who are closely connected with them. In addition, the prospect of multiple union arbitrations covering different locations could result in inconsistent first contracts under a system that offers no clear avenues for appeal or clarification. Faced with these constraints, a firm’s ability to shift and meet the rising competition from new firms could easily result in the loss of jobs from the failure of certain business lines, or the conscious redeployment by management of assets and new investment to locations that have lower costs and greater flexibility—traits most often associated with non-union operations.

The decision to send more activities offshore is also a distinct likelihood. Any efforts to stem that flow could easily lead to a collapse of the entire firm in the face of effective foreign competition. Non-unionized firms are able to make these decisions in anticipation of a union threat. Firms that are currently bound by collective bargaining agreements, of course, remain subject to the core obligations under the NLRA, which include the duty to bargain in good faith, without any antiunion animus.[5] Unions may try to challenge some of these decisions before the NLRB, but the powerful and economic rationales for taking these measures will reduce the chances of union success. Yet if EFCA were in place, the level of labor tension and strife is likely to increase the frequency and intensity of public protests, political campaigns, and work slowdowns or stoppages in response to decisions to relocate or outsource. The key union leaders who link these key business decisions to “the senseless slaughter of the good American job,” which are tantamount to “wanton acts of physical violence,” will not to take kindly to wholly lawful decisions to set up shop elsewhere.

The same can be said of officials like Andy Stern, who is intent on the restoration of the American dream and is not likely to pull in his horns if EFCA does not meet his expectations. The next round direct action and new legislative fixes offer them the path of least resistance. The economic dislocation under EFCA will lead to further strife, not industrial peace. Of course, the exact pattern of union threats, maneuvers, and responses is difficult to predict owing in part to the huge gaps in EFCA. But regardless of how these play out, it is certain that these devastating effects would arise chiefly from the synergistic effects of the first two provisions mentioned above. Taken together, they allow a union that acquires a sufficient number of signatures through a largely unregulated card authorization process to force management to accept a first “contract”—in reality an arbitral decree—that lasts for a two-year period. Step one under EFCA would routinely displace the long-established system of union elections by routinely allowing any union that presents a majority (e.g., 50 percent plus one) of the cards signed by workers in an appropriate bargaining unit to become the bargaining agent for all the workers, including those who had no knowledge of the campaign from either coworkers or the employer. For some workers at least, the misnamed EFCA would leave them no choice at all if they are not approached during the campaign.

EFCA’s second provision introduces a system of “interest arbitration”—in reality compulsory arbitration—under which the failure of the two sides to reach an agreement within as little as 130 days after union recognition—a short time for any first-time collective bargaining agreement that starts with a blank sheet of paper—results in the appointment of a panel of arbitrators to impose by decree the first two-year contract. Under the proposed timetable, negotiations are supposed to begin within ten days after union recognition. On the other hand, the union knows in advance the targets of its card check drives and can have its negotiation team in place before the results of the card check are computed. The element of surprise thus gives them a huge strategic advantage over small business firms, which may not be even able to find a lawyer to represent them during this short period. Large firms suffer from the same tactical disadvantage. Yet even if they take the costly step of having some negotiation teams in place, they could still be besieged by multiple claims at the same time, which could leave them short on vital resources. These difficulties are aggravated by the remainder of the statutory cycle. In the second stage the parties would have 90 days—a short time for addressing the multiplicity of issues in play—to reach a voluntary settlement. If an agreement is not reached by this time, then a mediator from the Federal Mediation and Conciliation Service (FMCS) would work with the parties for 30 days before the matter goes before a panel of arbitrators. Once again, it is quite possible that just scheduling meetings for the relevant negotiators—all of whom are likely to have multiple commitments—could be difficult within the statutory period. The entire time for negotiation could easily be consumed by collateral matters that drive the case quickly to arbitration, at which point it is anyone’s guess what will happen. EFCA provides no limitation on how long the arbitration panel may take to make its decision and does not indicate what happens to the various open issues for the bargaining unit that were left unresolved during the interim period. Its basic procedures and powers are all to be determined by regulation under the statute, none of which will be drafted when EFCA takes effect. Any effort to participate in the process whereby these regulations are drafted imposes additional costs, which are likely to prove especially large for small businesses that have no direct experience with the administrative process.

Notes

[1] See, e.g., Katherine V. W. Stone, From Widgets to Digits: Employment Regulation for the Changing Workplace (Cambridge University Press, 2004); Cynthia Estlund, The Ossification of American Labor Law, 102 Colum. L. Rev. 1527 (2002); Pal Wueiler, Promises to Keep: Security Workers’ Rights to Self-Organization, 96 Harv. L. Rev. 1769 (1983).

[2] The current rules are set forth in NLRA § 9(c)(1) through (5) and § 9(e)(1) an (2), 29 U.S.C. § 159(e)(1) and (2), and simply adds a new Section 9(c)(6) and (7) to the Act.

[3] It is an unfair labor practice for an employer “by discrimination in regard to hire or tenure or employment or any term or condition of employment to encourage or discourage membership in any labor organization.”

[4] See generally Robert A. Gorman and Matthew W. Finkin, Basic Text on Labor Law, Unionization and Collective Bargaining (West Publishing, 2004).

[5] See, for discussion of the various obligations under Sections 8(a)(3) and 8(a)(5), the discussion of Textile Workers Union v. Darlington Manufacturing Co. 380 U.S. 263 (1965).

Part 2: Ron Moore: EFCA Fixes a Broken System

The Employee Free Choice Act (EFCA) applies a necessary fix to a broken system. At present, workers find obstacles to the right to organize increasing, leading to an effective diminution of the right. Any. Thus, any analysis of EFCA must first acknowledge the current climate faced by union organizing campaigns.

Background to a Controversy

The turning point in the business culture toward union workers occurred when Ronald Reagan fired the air traffic controllers in 1981. Since then, the union avoidance consulting industry has flourished. Reagan’s decision marked a paradigm shift in the traditional deference held for union workers in this country. It signaled an approval for taking offensive actions against workers, and the labor movement proved itself unprepared for such an onslaught. By the time labor recovered from this abrupt shift, its strategy focused on the issue of strikebreakers or replacement workers, or scabs. This caused a resource reallocation from new organizing to protecting current bargaining units, a fight that still reverberates today and is at the heart of the split by the Change to Win Federation unions from the AFL-CIO.

Many companies found that instigating a strike action could tilt the balance of power in their favor, much like Reagan’s action did against federal workers. Union workers simply walked out, and whether it was considered a strike or lockout in the long run was a matter of details. The fact remained that workers left their jobs, leaving the work to be done by replacements. This tactic was remarkably successful and established bad-faith bargaining as the norm. Replacing union workers became the standard for breaking—or, at the very least, diluting—union bargaining units. In the end, strikebreakers were not the problem—the business culture was—and as labor found more success in the public sector, private-sector organizing suffered. This early history set the stage for EFCA as bad faith was rewarded, so it naturally followed that attempts to organize new bargaining units would meet with similar results.

Streamlining the Process

It is true that the right to organize is protected by law. Under current law, if a majority of workers wish to organize a union, they must first approve one through a card check process and then hold an NLRB election. Richard Epstein writes that “the first proposal would allow either party the option to substitute a card check system for the current electoral system.” Then he admits that “EFCA leaves in place the present NLRA provisions that allow unions to proceed by filing a representation petition supported by 30 percent or more of employees in an appropriate bargaining unit and then holding elections.” Well, it can’t be both a substitution and in keeping with the current NLRA provisions. The key issue is: Who chooses, and what weight does the employee’s choice carry in the law?

Currently, only after 50 percent plus one approves twice may employees bargain with their employer. Once an agreement is negotiated, an additional vote is held to approve the agreement. Once that agreement is approved, workers have a union and begin reaping the benefits of a union contract and pay union dues. It currently takes three votes before a union is established. What is meant to be an unencumbered right of the majority is bogged down by process delays.

If the process worked as it should, this debate wouldn’t be necessary. But it doesn’t. The employer has the opportunity to stall the process during each step, first by demanding a vote after the card check. This sets in place a campaign-style atmosphere and tension in the workplace, with only one side having access to the voters—and, most importantly, the voter rolls. Since that side is also the source of the voter’s income, this is self-evidently problematic for union supporters. There is no impetus for the employer to allow union representatives to actively campaign on company time, as is allowed for campaigning against the union.

It is during this step in the process (between card check and the second vote) that things begin to get ugly. Most organizing campaigns break down between the card check and the second vote, and for good reason. The employer, who believes he benefits by this breakdown, often spends tens if not hundreds of thousands of dollars making sure this occurs. If and when the vote is held, even a victory is hollowed out as it serves as a trial run for the employer to determine his relative strength at the bargaining table.

EFCA Protects Pro-Union Workers

In other words, how difficult will it be to negotiate in bad faith or simply refuse to negotiate? It’s a perfect storm of union-breaking: A vote is held that means nothing to the organizing effort yet means everything to an employer wishing to break the effort down. It defines the number of workers needed to be terminated or influenced to diminish support for a union. For example, if the night shift is strongly pro-union, fire the leader on the night shift. If the afternoon shift is weak, promote an anti-union leader. Or just simply change schedules. Thishappened recently during an organizing drive at Price Rite supermarkets in Rhode Island: A night shift leader was assigned to a lesser position on a different shift and ultimately terminated after appearing at a press event supporting passage of EFCA.

Terminating one leader, while illegal, sends a ripple effect through the workforce and tamps down public support. Any good union organizer will tell you that the willingness to go public is essential to victory. Once a climate of fear is established and the union effort goes underground, it is dead. Epstein claims that “the union knows in advance the targets of its card check drives and can have its negotiation team in place before the results of the card check are computed. The element of surprise thus gives them a huge strategic advantage over small business firms, which may not be even able to find a lawyer to represent them during this short period.” In fact, the most time-intensive part of an organizing campaign is building the list of workers, and the employer alone knows the number of workers at his site. No organizing drive succeeds in secret, and this would not change under EFCA. No employer would be surprised by an unexpected demand to negotiate.

Countless organizing campaigns are pulled at the point it goes underground. Why would a union pull a campaign? At first glance, this appears to prove a prime example of the union, not the workers, controlling the campaign. But in fact unions are democracies, and the resources spent to organize the unorganized come from current members’ dues. So to throw resources away in a losing campaign is tragic, but at times it is the fiscally responsible thing to do. Employers know this. The cost of organizing in union monies and workers’ lives is simply too great for a right that is presumably unencumbered. The system doesn’t work.

So what will change once EFCA is law? A significant change and central focus of the opposition is card check. Currently the employer has the choice after card check to accept the results or call for a second vote; under EFCA the employees would have that choice. The fact is that if a typical campaign yields 70 percent or more support, the second vote is redundant and workers are anxious to negotiate, not to campaign for a second vote. It is in the negotiation process that the benefit of the union is determined. Any union that counsels workers to move forward with a bare majority after card check is making a fool’s deal and hasn’t properly educated the workforce. So in practical effect, this scenario will rarely occur. Workers will simply not choose to stall a process they support. It’s counterintuitive to believe that a large majority would want to negotiate then hold off the decision so their efforts can be thwarted.

Punishing Illegal Behavior

The second change EFCA causes is the consequences for illegal behavior. Currently 30 percent of employers facing organizing campaigns illegally fire pro-union workers. An employer who illegally fires a worker for union activity is obligated only to pay back pay during the period the employee was out of work, plus interest. In fiscal year 2006, the average back pay award paid by employers was $4,026.82.[i] Consequently, the only out-of-pocket expense employers face is the cost of legal representation, which they have already retained in their union avoidance law firm. Union avoidance consultants never openly tell their clients to break the law, but they do inform their clients of the consequences of their actions. But there are no fines assessed against employers who violate employees’ rights under the NLRA. A recent study found that during NLRB elections, 46 percent of workers complained of pressure from management. In contrast, during majority sign-up campaigns, only 4.6 percent of workers who signed a card with a union organizer reported that the presence of the organizer made them feel pressured to sign the card.[ii]

Some executives are known to refer to the NLRB’s back pay remedy for firing union supporters as their “hunting license.”[iii] The small consequences encourage bad behavior. EFCA would increase the cost of illegal behavior, much as our criminal justice system reminds us that crime doesn’t pay. If robbing the local bank only meant returning the money if caught and then walking free, banks would be robbed routinely. Bank robberies are rare because the penalties are harsh.

Bad-Faith Bargaining

The third benefit of EFCA addresses bad-faith bargaining. Employers must sit down and negotiate in good faith with their employees. The current practice of walking away from the table or establishing an untenable position would have consequences under EFCA. A federal mediator is invited into the process by either side to help facilitate agreement. EFCA does not mandate that this step must be taken after 90 days. In extreme cases, arbitration leads to an imposed resolution. The difference under EFCA is that both sides realize this going in and have the impetus to negotiate in good faith.

Professor Epstein claims that the EFCA’s “impact would extend to virtually all businesses, except from some small business that fall below the ‘interstate commerce’ thresholds that the NLRB applies in exercise of its own jurisdiction.” He claims that “small businesses, which as a group are the largest source of new jobs in the country, will find themselves besieged with insistent demands for unionization, for which they are ill-equipped to cope.” Opponents of EFCA like to tout the impact on small businesses. In fact, small business will not be impacted by EFCA, as they are already exempt. Retail employers with sales under $500,000 annually and non-retail employers with sales under $50,000 annually do not fall under the jurisdiction of the NLRB, and their employees have no collective bargaining rights under the NLRA. How can that lead to the “besieged” state of affairs Epstein predicts?

Fixing a Broken System

EFCA would take a broken system and make it more equitable. The current business ethic encourages the zero-sum mentality that if workers can partner with their employer contractually, the employer loses. Workers will not vote their company out of existence; no worker organizes to destroy the company and put himself out of work.

According to a report from the Center for American Progress Action Fund, unionization is good for the economy overall and “putting more money in workers’ pockets would provide a needed boost for the U.S. economy.” Former Secretary of Labor Robert Reich states that higher wages and higher benefits would give workers the purchasing power they need to buy more of the goods and services that this economy produces.

The two sides have clearly staked out their territory: One side wants to break the union, but the other side doesn’t want to break the company. EFCA removes the influence of outsiders from the process and brings employer and employee to the table with the books open and fists unclenched to negotiate an agreement that benefits everyone.

Notes

[i] Steven Norwood, Strikebreaking and Intimidation: Mercenaries and Masculinity in Twentieth-Century America (Chapel Hill: University of North Carolina Press, 2002), 247, cited in Gordon Lafer, “Neither Free Nor Fair: The Subversion of Democracy Under National Labor Relations Board Elections,” American Rights at Work, 2007.

[ii] Adrienne Eaton, and Jill Kriesky, Fact Over Fiction: Opposition to Card Check Doesn't Add Up, 9/06)

[iii] Norwood, Strikebreaking and Intimidation, 247.

Part 3: Richard A. Epstein: Moore’s Defenses Found Lacking

Ron Moore has written an impassioned plea for the Employee Free Choice Act (EFCA), to which I think that it is necessary to respond. The one point on which we both agree is that the current system is dysfunctional. Where we disagree is the reasons why it is so.

Government v. Public Unions

For Moore, the key point is that the system of collective bargaining has broken down because of the nonstop employer resistance to union organization, which has become more sophisticated over time. In his view, unionization represents an ideal to which this nation should aspire in its labor policy.

Given that undefended major premise, he then concludes that EFCA removes the major obstacles to more extensive unionization. The card check system spares the union the difficulty of having to win an election. The compulsory interest arbitration system in his view prevents bad faith negotiation by an employer who would rather go through a strike or a lockout—he doesn’t care much which takes place—in order to defeat the union representation. Once these two steps are taken, the inexorable conclusion is that workers will receive higher wages, which will give them additional purchasing power, which will aid not just the union members but everyone in society.

The key theoretical point in this analysis is whether this country’s welfare is advanced by a business culture that accepts a strong union presence as part of its basic structure. Moore claims that the defining moment in recent years is the decision of President Ronald Reagan to break the strike of the air controllers to—I might add—much public approval. Reagan was right in taking firm action. It is simply unconscionable to allow a wage dispute over even millions of dollars to jeopardize a nation at a social cost of many billions.

The right policy in my judgment is that government agencies should refuse to negotiate with public unions. Moore may praise the increase in power of public unions as an offset to the decline in the private sector. But he has to deal with the grim truth that the rich labor and pension plans negotiated by these public unions are a major source of the budgetary shortfalls in major states like California and New York, which now have to tax ordinary workers, many of them union members. Public employees get to live high on the hog while everyone else must tighten belts.

Private Unions Any Better?

His arguments are no stronger when it comes to the private sector. The current legal regime on collective bargaining is an outgrowth of two major statutes: the Wagner Act, which was passed in 1935 at the height of the New Deal, and the Taft-Hartley Act, passed in 1947 as part of the post-war Republican reaction against a statute that was widely perceived to have tilted the scale too much in favor of unions. For these purposes, however, the key point to note is that the current labor structure necessarily invites the kinds of conflicts that both Moore and I deplore.

But there is no way that these conflicts will be reduced with the passage of EFCA. All that will change is that the scales will once again be tilted more toward unions. Indeed, these changes are so revolutionary that the new regime will be vastly more pro-union than the original Wagner Act itself.

A Company’s Choices

Why, then, the disorder? It is critical here not to dwell on the individual anecdotes to which Moore gives excessive weight—there are many horror stories about union misconduct that could be added to the list. Rather, we must get at the structural features that define collective bargaining relative to bargaining in a competitive market, where unions cannot backstop their demands by relying on the current statutory framework that makes them the exclusive bargaining agent of workers in that unit. Quite simply, the National Labor Relations Act confers a statutory monopoly and then compounds the threat by imposing on the employer a duty to bargain. There is nothing under this system that promises any gain for the employer relative to a union-free environment.

The only choice the employer has to face is strictly prudential. One choice is resistance, which has the following payoff structure: The union wins, and the employer has to bear the costs of resistance, the costs of a disadvantageous contract, and the loss of morale and trust from the struggle. Or it wins, and it can return to the status quo, at least until the next organizing drive. The second alternative is to cut a deal and to live with a union contract without the costs of resistance and the acrimony that follows. That deal will, however, be worse than the status quo ante.

Some employers choose the second alternative. But many are willing to pick the first alternative, which gives some powerful behavior evidence as to just how much they think unionization will hurt their bottom line. The private losses that are incurred for resistance are very large. Clearly, employers think that the gains they hope to achieve are proportionately large.

One clear consequence of resisting unionization is that the costs of reaching a labor contract become high precisely because the terms are so indefinite. There is no unique wage or set of collateral terms to which the parties can converge. Each side holds out for as much as it can get, which produces titanic struggles at high costs. Competitive markets do not have this built-in instability: In normal negotiations, the party that does not like an offer can refuse to deal and go elsewhere. In union negotiations, however, the choice of alternatives narrows the bargaining range between the parties. In addition, the use of competitive markets allows for quick wage adjustments, up or down, in the face of changing market conditions. That degree of flexibility avoids the suicidal patterns of negotiation that have led to massive dislocation for workers, shareholders, and customers alike, such as when the UAW could not back off its over-rich contracts fast enough to prevent GM from bleeding to death.

These differences matter when the issue is not whether the union or management wins this or that negotiation but whether the bargaining structure improves social welfare for all involved. That question is a no brainer. Bargaining under the current system increases transaction costs but cannot add to productivity. Instead it creates ill will within the work place and massive third-party dislocations. It is lose/lose/lose all around. Workers sense this and, hence, over time resist unionization in greater numbers. The decline in private unions preceded the Reagan confrontation with the air traffic controllers and continued long after it. The truth is that unions make firms uncompetitive, which poses serious risks for their workers.

Moore denies this, claiming that both the Center for American Progress and former Secretary of Labor Robert Reich claim that increased purchasing powers of union workers will lead to more purchase of the goods this country needs, that anyone who understands the wonders of “purchasing power” becomes pro-union. The economics behind this claim is primitive at best. All monopolists get higher wages or prices for their goods and services. But those gains are accompanied by greater social losses precisely because they keep prices and wages artificially high. Now the goods that are sold carry higher price tags that offset the higher wages. The displaced workers make lower wages and thus reduce aggregate demand. The purchasing power that increases for some decreases for others. On net, the social pie shrinks.

The standard analysis behind this conclusion is quite simple. So long as demand curves are negative—i.e., so long as fewer goods and services are demanded at higher price—monopoly is socially undesirable. At best, the higher prices transfer some wealth from the buyer of goods and services to the seller of those goods and services. Yet at the same time some gainful transactions are forgone, creating what economists call a deadweight social loss. And labor monopolies are still worse because of their great durability, high transaction costs, bitter conflicts, and unwelcome disruptions of service.

The Consequences of EFCA

So how will EFCA change this situation? Only for the worse. It will not get rid of the structural monopoly. Rather, it will increase the returns to unions from organizing. The card check campaign can be done strategically, sometimes in secret. The union can pick off part of a plant and then impose conditions that will disrupt the operations elsewhere. Charges of oppression and intimidation will be common. EFCA does not allow the use of card check to decertify a union nor to resolve disputes between unions. Unions would never trust card check when they are at risk. The whole point of EFCA is to create a club that reduces the cost of organizing against employers, which will increase its frequency.

Worse still, the card check, once successful, does not lead to a hard bargain. It leads to mandatory interest arbitration under rules that no one knows and administered by people no one can identify. Every contract term—wages, benefits, pensions, grievances, sick leave, promotions, vacations—is left to be decided by federal officials under regulation after EFCA becomes law. Moore glosses over the mandatory arbitration, saying that it will come into play only when there is very bad conduct by the employer. Dream on. Everyone bargains in the shadow of the law. Once unions know that they have favorable arbitrators, they will not settle for less than they expect arbitration to give them. And that could be a lot. The arbitrators could impose a Davis-Bacon regime that forces all firms to pay union wages. Wal-Mart, to name just one, could not survive in its current form in that environment. It would have to raise prices, cut selection, and in general lose the competitive edge that makes it a bellwether firm in down times.

And for what? In the course of working on EFCA, I have had the privilege of working with Anne Layne-Farrar, an economic consultant at LECG who has tried to estimate the impact of unionization of employment methods by the kinds of rigorous econometric techniques that are needed in this debate. Her conclusion: for each 1 percent increase in unionization, count on a 0.30 to 0.35 percent increase in unemployment. Put in perspective, it means that if unions can organize 5 million workers of the next couple of years—I doubt that they will garner more—that translates into 1.5 million workers out of jobs. I hope that Moore can sleep well with that knowledge. I can’t.

Part 4: Ron Moore: Epstein Ignores the Reality on the Ground

The debate over the Employee Free Choice Act (EFCA) is a perfect example of the fallacy of arguing from the sterile view of the academy and, to some degree, inside the beltway. With all due respect to Dr. Epstein, he and the political elite can argue this issue from a theoretical point of view without regard for anecdotal evidence. But when it comes to the right to organize, the only point of view that really matters is the one outside the ivory tower and hallowed halls; the right to organize belongs to workers alone, period. Their experience determines the framework for the debate. Any perfunctory field research disproves Epstein’s assertions.

Let’s look at a similar labor battle that was opposed by the same forces opposing the right to organize: the provisions enacted prohibiting the employment of children. The business community argued that child labor laws violated the takings clause of the Constitution, not dissimilar to one argument against EFCA. Today, if employers hire children—as many did prior to the reform imposed by law—they would face consequences as scofflaws. Society would be rightly outraged. Clearly, hiring children to do menial tasks at a reduced rate would increase profits. Child labor still exists outside the United States, and some products brought in may be made by children who are permitted for a price by their families to live in dormitory-style housing and work without any real protections. Why does child labor no longer exist in this country? The consequences are too great, and it simply isn’t tolerated any longer in our society.

How about employment discrimination? If an employer hired only white workers or paid African-American workers at a different rate—and many did until the law made discrimination and disparate treatment too costly—would compliance avoidance consultants be hired to counsel on the cost versus benefit of skirting this law? No, and why is that? Because society deemed it unacceptable and an affront to its values, and again, the consequences are too severe. This is not to argue that current employers would discriminate or hire child workers but that simply enforcement (or the lack thereof) of the law establishes a standard.

The right to organize is no different. What may be legally protected in theory is not realized on the ground. The system is broken. It makes no difference if studies are commissioned to say otherwise or that public relations flacks can construe canards. The right to organize is so effectively diminished that most new bargaining units merely replace destroyed units. The consequences are so low that it is simply an accepted reality. Any attempts to regain those rights were so fiercely opposed and so minimally protected that the right effectively ceased to exist.

It is simply not a credible assertion that “there is no way that these conflicts will be reduced with the passage of EFCA.” Any field research (or, yes, anecdotal evidence) proves that it is the “union avoidance” consultant industry that breeds conflict. In fact, when employers agree to neutrality, the conflict disappears. Anecdotal experience does matter when it is uniformly experienced and in fact the norm.

It is telling that Epstein only refers to “charges of oppression and intimidation” (my emphasis) by union organizers rather than actual instances. Accusations are not proof of wrongdoing, and in fact when a union is found guilty of wrongdoing after winning an election, the results can be tossed. No reciprocal consequence exists for employers convicted of wrongdoing.

The debate over EFCA isn’t about unions increasing their membership, the so-called secret ballot, or mandatory arbitration during the first contract. It’s about correcting a broken system. The system is broken outside the ivory tower and the halls of Congress. Anyone exercising his or her theoretical right to organize is taking an enormous risk in the real world. Any worker reaching out to a union for help is asking for trouble.

Epstein argues that “the National Labor Relations Act confers a statutory monopoly and then compounds the threat by imposing on the employer a duty to bargain. There is nothing under this system that promises any gain for the employer relative to a union-free environment.” It is true that any contract—whether it is for widgets, cleaning services, or employment standards—is at that moment a monopoly. No company would agree to a long-term contract that is not exclusive, for to do so would make it worthless. So the idea that workers choose one union as their exclusive representative is unremarkable. Unions must compete in the marketplace to win the right to represent a bargaining unit. Just as an entrepreneur seeks to provide better service and products than his competitors, so must unions compete with each other to represent workers. What’s wrong with that?

That Epstein believes that employers negotiate bad contracts is no reason to continue to discourage negotiation. His statement that the current “flexibility avoids the suicidal patterns of negotiation that have led to massive dislocation for workers, shareholders, and customers alike, such as when the UAW could not back off its over-rich contracts fast enough to prevent GM from bleeding to death” has no bearing on EFCA any more than a contract negotiated for other goods and services that is “over-rich” should be torn up. The fact that GM workers had a seat at the table and were able to partner with GM and be a part of the conversation is the central issue. That GM is mismanaged is not the fault of the workers and is not a reasonable argument against employer/employee partnerships through collective bargaining.

As for Epstein’s statement that EFCA “leads to mandatory interest arbitration under rules that no one knows and administered by people no one can identify,” surely he must know that both parties receive a list of five arbitrators and narrow the list to one. How is that people who are not identified?

The right to organize is a fundamental one, and the employer’s right to union avoidance is no more valid that an employer’s right to avoid compliance with other laws. The employer should have no role in the employee’s decision to organize. It’s not about the employer; it’s about the worker, period.

So the argument that the right is protected, that the law works, that a certain percentage of campaigns narrowly defined are won is simply a canard. On the ground, the right is so impeded by obstacles laid down by firms who have profited by preventing Americans from exercising a legal right that a correction is needed. EFCA is that correction. I’ll sleep better at night when the rule of law is enforced in the workplace and that workers can once again improve their communities and their families’ lives by the kind of good faith agreements that will once again occur through collective bargaining under EFCA.